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Will Holiday Season Reward Retailers?

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On the verge of completing another year, the overall economic situation is moderately improving. The economic recovery in the U.S. remains soft, and situations in the Eurozone is no better. In addition, mounting Middle East tension remains a grim reality. In such a scenario, the big question is: “What does this holiday season have in store for retailers?

Taking a cue from 2011 holiday season, early-hour store openings, huge discounts, promotional activities and free shipping for online purchases are in play for both brick-and-mortar as well as e-commerce retailers as of today.

Research hints that optimism about this holiday season remains intact. Data compiled by National Retail Federation, the nation's largest retail trade group, suggests a 4.1% jump in holiday sales to $586.1 billion -- short of the 5.6% growth registered last year, but above the 10-year average sales of 3.5%.

As suggested by comScore, online retail spending is forecasted to be $43.4 billion during the period between November and December. This reflects an expected increase of 17% that fares better than the growth rate of 15% achieved last holiday season. This is further validated by comScore’s projection of a 16% rise in online retail spending to $10.1 billion in the first 18 days of the said period.

Consumer confidence is also gaining momentum. The Conference Board’s reading of the Consumer Confidence Index -- a barometer of U.S. consumer health -- rose to 72.2 in October from 68.4 in September and 61.3 in August.

The labor market is gradually heading its way out of the economic doldrums. The unemployment rate in the U.S., reported by the Bureau of Labor Statistics, remained at 7.9% in October, marginally up from 7.8% in September but down from 8.1% in August.

The above data seem encouraging barring anything unforseen. We expect this holiday season could bring cheers to retailers such as Macy’s Inc. (M - Free Report) , Kohl’s Corp. (KSS - Free Report) , Nordstrom Inc. (JWN - Free Report) , Limited Brands Inc. , The Gap Inc. (GPS - Free Report) , Ross Stores Inc. (ROST - Free Report) , Wal-Mart Stores Inc. (WMT - Free Report) , among others.

However, there’s a lingering fear that if recession-hit consumers decide to go cautious with their spending in this holiday season, or if the economic crisis aggravates, the picture might change for the negative. A pick-up in demand on Thanksgiving Day and Black Friday would definitely augur well for the economy.

Happy Holiday Season….

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